Tajikistan’s lower house (Majlisi Namoyandagon) of parliament today endorsed amendments proposed by the government to the country’s law on credit histories. The amendments, in particular, stipulate drawing up a registry of citizens who received loans from banks.
According to MP Sharif Rahmizoda, the head of the Majlisi Namoyandagon Committee on Economics and Finance, such a list had previously been drawn up by the National Bank of Tajikistan (NBT) and it had included only the loan recipients who had given the written consent for that.
Now, the consent of citizens is not needed for including them in the registry, Rahimzoda noted.
According to the statistical data from Tajik central bank, local banks have provided 8.7 billion somoni in loans to date.
One of the main problems facing Tajik banks is non-return of loans and delay payment of loans. The NBT head Jamshed Nourmahmadzoda says current loan debts amount to 4.6 billion somoni.
Credit history or credit report is a record of an individual’s or a company’s past borrowing and repaying, including information about late payments and bankruptcy.
When a customer fills out an application for credit from a bank, store or credit card company, his or her information is forwarded to a credit bureau, along with constant updates on the status of his or her credit accounts, address, or any other changes made since the last time he or she applied for any credit.
This information is used by lenders to determine an individual’s or entity’s credit worthiness; that is, determining an individual’s or entity’s means and willingness to repay indebtedness. This helps determine whether to extend credit, and on what terms. With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR).
Recall, the legal framework for the information sharing practice was laid in 2009, when the parliament passed the Law “On Credit Histories.” Tajikistan is the second country in Central Asia, after Kazakhstan, having passed such a law.
The first credit bureau — the Credit Information Bureau of Tajikistan — was founded in the country in 2010.
Activities of the credit bureau benefit both banks and bank customers. The bank has an opportunity to weed out law-abiding customers from fraudsters to avoid unnecessary risks. As far as a bank customer is concerned, by timely repaying the loans the borrower increases his reputational pledge, and his credit history becomes positive. In the presence of well-functioning system of credit information sharing, a client may receive more favorable access to credit, and on more favorable terms.
The practice of credit information sharing is being promoted in developing countries around the world.
